Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (33195)	5/25/2005 8:56:01 PM
From: el_gaviero	Read Replies (2) \| Respond to of 110194

Good answer to my post, especially this: <<Prechter is constructing a perfectly absurd argument that says that inflation is really deflation because the prices of long term bonds fall.>> For years I have thought that inflation was inevitable for political reasons. But discussion on these boards has loosened up my mind a bit, and now I think that there might be a case for deflation. Trouble is, I don't have a clear story to tell myself concerning what it might be. Sure, you can say that in a time of economic difficulty large numbers go bankrupt, and send their debt to money heaven, the result of which is that money gets subtracted out of the system, and there is deflation. But I don't understand why the FED can't just buy up bad debt, or at least enough of it to prevent serious loss of purchasing media within the system.

To: Tommaso who wrote (33195)	5/25/2005 10:53:27 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

"Fearful holders of suspect long-term debt far from expiration [i.e. long bonds] could dump their notes and bonds on the market, making prices collapse [i. e. prices of those bonds]. If this were to happen, the net result of an attempt at inflating would be a system-wide reduction in purchasing power of dollar-denominated debt, in other words, a drop in the dollar value of total credit extended, which is deflation." (130) I agree that is a confusing statement at best but the more I read it the more it just seems blatantly wrong as opposed to confusing. Let me focus on this piece "the net result of an attempt at inflating would be a system-wide reduction in purchasing power of dollar-denominated debt ... which is deflation" That is blatantly stupid. Now my position is that attempts at reflation will ultimately fail, but that does not seem to be what he is saying at all. In fact a reduction in the purchasing power of dollars (why is he saying purchasing power of debt anyway?), would likely be inflationary. As I said, at best it is some convoluted concoction containing multiple ideas in a single sentence, none of them explained properly. At worst it is blatant nonsense. Mish